Kubus scheme

This article is about the Ponzi scheme. For the Kubuś armored car, see Kubuś.

The Kubus scheme was a Ponzi scheme that originated in South Africa in the 1980s and was subsequently exported to the United States. It remains among the biggest frauds in the history of both countries.

Origins

The scheme was initiated by Adriaan Nieuwoudt after his grandmother showed him a milk culture she used as a skin product. He turned the culture into a work-from-home business by selling dried plants that would produce thick milk for R500, which would produce 10 jars of culture a week. In return he paid R10 per envelope or R100 per week for producers who sent him a teaspoon of the culture, making for break-even within five weeks. The dried product sent back by activation kit buyers were ground up, without first being removed from the envelopes in which it was shipped – and resold as new activators.

Thousands of people invested a reported R140-million in the scheme before it was declared an illegal lottery.

Kubus in the USA

According to subsequent evidence presented at trial, the Kubus business was exported to the United States in 1984. By late 1984 several corporations had been established around the product, among them: Activator Supply Company, Inc. sold "activator kits" that allowed the making of the milk culture for $350 per a minimum of ten kits; Culture Farms, Inc. produced, bought and sold culture; and Cleopatra's Secret, Inc., (also known as House of Cleopatra) was to utilise the culture in manufacturing cosmetics.